S’wak Plantation to catch up in next quarters
KUCHING: Sarawak Plantation Bhd (Sarawak Plantation) is expected to see a strong catchup in the subsequent quarters given the current crude palm oil (CPO) price momentum and continuous growth in fresh fruit bunches ( FFB) production, analysts say.
In a report, the research team at Public Investment Bank Bhd ( PublicInvest Research) said: “We expect to see a strong catchup in the subsequent quarters given the current CPO price momentum and continuous growth in FFB production.”
It noted that Sarawak Plantation’s management has set an aggressive FFB production growth target of 30 per cent year- on-year (yoto 364,000 metric tonne ( MT) this year on the back of yield improvement from the enhancement area transferred to harvestable area.
For January to July, it jumped 31 per cent y- o-y to 188,208MT and the research team said it expected to see a stronger growth in the subsequent months.
“Management expects lower production lower in the coming months on the back of higher production yield.
“It expects full-year cost of production to average at RM1,650 per MT,” it added.
Meanwhile, it noted that manuring activities have slowed down in 2Q but it picked up since 3Q.
“Given the recent strong CPO price performance, management has locked in forward sales of 4,000MT for August delivery at RM2,760 per MT.
“It also has an outstanding forward sales of 1,000MT per month at RM2,360 per MT,” it added.
On the encumbered area, PublicInvest Research said Sarawak Plantation is currently finalising the recovery of 400 hectares in the central region. It also declared 586 hectares new enhancement area after being transferred from the encumbered area, bringing the total enhancement area to 2,992 hectares as of end- June 2020. During the quarter, 425 hectares was replanted. Harvestable area totaled 19,219 hectares while immature area stood at 4,553 hectares.
On its second quarter of FY20 ( 2QFY20) results, PublicInvest Research noted that its core earnings jumped five-folds to RM7.6 million.
“Excluding the change in fair value of biological assets amounting to RM11.9 million, the group’s core earnings surged 533 per cent y- o-y to RM7.6 million, mainly driven by stronger plantation margin.
“During the quarter, EBIT margin surged from 2.1 per cent to 14.1 per cent. 1HFY20 all-in CPO cost of production (ex-palm kernel credit and distribution and administrative expenses) averaged at RM1,680 per MT compared with 1HFY19’s RM1,706,” it added.
We expect to see a strong catch-up in the subsequent quarters given the current CPO price momentum and continuous growth in FFB production. PublicInvest Research